Data increases predictability in supply chain networks

Globally operating manufacturing companies tend to form vast supply chain and production networks that, in some cases, could benefit from optimization. Diane Palmquist, Vice President of the cloud supply chain platform GT Nexus, thinks that companies should harness technology to make the most of their supply chains. According to her, greater supply chain visibility leads to lean operations and can essentially save companies a lot of money.

As business processes become global operations and companies work with vaster and more complex supply chains, optimal delivery times and inventory management take on a key role. When talking about managing these issues with data technology, Diane Palmquist from GT Nexus, in her work with manufacturing companies, prefers to use the term network.

“With networks I’m not referring to having a particular IT system in place, but having access to data and visibility throughout the supply chain. The best companies in the world are those that can react comprehensively and instantly to anything happening in their network, instead of having a rigid one-process operation”, Palmquist argues.

Outsourcing might be a logical step towards optimizing production costs and delivery in manufacturing, but this places big demands on visibility throughout the whole network. According to Palmquist, visibility provided by data analysis adds to efficiency in production and also increases cost and risk control.

“For many manufacturing companies, their manufacturing site could be a contracted operation far away. They should partner with the suppliers, just like Apple does, to help them achieve the leanest operation and avoid excess inventory. This would eventually lead to getting the materials at a lower cost. Even if something is in the supplier’s books instead of the company’s, in the end it could still end up costing money to the company itself.”

Improved supply chain management with data

Palmquist offers a real-world example, where the right technology can solve a supply chain visibility issue in inventory management and also save in costs.

“While manufacturing a giant mining machine, a company might realize that they don’t have the required axels. Shutting down the plant costs them USD 111,000 a minute. Without sufficient visibility between the company and the supplier, they can’t be sure whether the parts will arrive in time. To solve this they can charter a plane to deliver the parts, but that will cost USD 300,000. So, now they are paying millions of dollars per year for this just-in-case-shipping of axels.”

“If, however, the company has a system that tracks the parts automatically, then they know if they can get them in time and they can order the air freight deliveries only when really needed. To stay agile we need information. A company can make a different plan two days in advance if they are clear on what the options are.”

In a world of big data and sensor-integrated smart machines, information gathering is becoming the norm. This is a possibility to extend individual benefits from innovative data applications to the whole network.

“Social media makes it possible to contextualize any data from any source. Companies can take trend analysis from their entire network, not just one machine, to figure out trends that nobody has even thought of yet. The key is to keep your network orchestrated and moving in tandem.”

On the other hand, according to Palmquist, endless data accumulation might leave companies wondering what the action point is and what exactly is it that they should be focusing on.

“Any company has the ability to gather data, rationalize it, make predictions and take action based on those predictions. The last part is the Holy Grail that everybody is searching for. What action can and should I take based on all this data?”

Automation makes manufacturing leaner

Palmquist says that automation plays an important role throughout the supply chain all the way from combining different demand signals to reducing variability in the raw materials. She believes that manual routine tasks in any industry will be a thing of the past, especially in manufacturing.

“Anything that is not adding value to the customer is not useful in business. Manually you can’t take advantage of any predictive analysis. If you have outsourced your manufacturing to some other company that offers lower costs, but is operating manually, you won’t have oversight of anything they do.”

Investing in automation might actually be the way to get getter better work results from people as well.

“The future scenario does not include eliminating all people and having a world populated by robots, but rather people will be putting all their time on more value-adding activities and fixing issues that are not going according to plan. If you take away the manual part and everything is automated, it does not change much on a personal level, but it will make a big difference across the supply chain.”

Diane Palmquist works as Vice President, Manufacturing Industry Solutions at GT Nexus

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